Massive Southwest Devluation Happens Monday, How to Beat It

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Southwest Rapid Rewards points are currently worth 1.69 cents each. Starting Monday, March 31, 2014, they will be worth about 1.44 cents each.

What is the exact devaluation?

Among the Six Types of Frequent Flyer Miles, Southwest has a fixed-value program. For every dollar of the “Wanna Get Away?” base fare, you have to spend 60 Rapid Rewards for an award ticket.

So a $220 Southwest ticket with a $200 base fare would be 12,000 Rapid Rewards + $5 in taxes as an award. Here’s How to Book a Southwest Award.

For bookings made on or after March 31, 2014, the redemption rate will be 70 Rapid Rewards per dollar of base fare. That $200 base fare goes from being a 12,000 point award to 14,000 points.

Interestingly, Southwest is not just devaluing its existing points, which most of us get from credit cards. It is also devaluing flying Southwest.

You currently earn 6 points per dollar spent on Southwest “Wanna Get Away?” fares and then need 60 points per dollar to redeem those points. That works out to earning a 10% rebate on your Southwest flights through the Rapid Rewards loyalty program.

After March 31, 2014, you will still earn 6 points per dollar but need 70 points per dollar to redeem. That cuts the rebate from flying to 8.6%. I can understand a devaluation of credit card points even if I don’t like it, but I can’t see why Southwest would want to cut the rebate percentage for its flyers. I’m surprised the earning rate is not being bumped to 7 Rapid Rewards per dollar spent on Southwest base fares to keep the rebate percentage of flying constant at 10%.

This is bad news for those of us holding Rapid Rewards and Ultimate Rewards, since they transfer 1:1 to Southwest. But the bad news illustrates why holding transferable points is better than holding points from a single airline. While Rapid Rewards used past March 31, 2014 were cut in value by 17%, Ultimate Rewards used after that date have most of their uses (like transfers to United, Hyatt, or British Airways) unaffected.

This illustrates one of the main points I made in Which Miles Should You Stockpile?

Your Move

What trick can you take advantage of to beat the devaluation?

Southwest flights are currently bookable until October 31, 2014.

Spend all your Southwest points by Monday for flights through October 31, 2014. Book speculative airfare for 60 points per dollar. If you later decide not to fly an award, you can cancel it up until the day of departure and get all your points back.

There’s nothing to lose from speculative bookings, so make sure you get them done this weekend, so that any trips you take from now until Halloween are at the 60 points per dollar price instead of 70 points per dollar.

How does this devaluation affect you? How big is your stash of Southwest points? Was the notice since September 2013 enough?

 


Editorial Disclaimer: The editorial content is not provided or commissioned by the credit card issuers. Opinions expressed here are author’s alone, not those of the credit card issuers, and have not been reviewed, approved or otherwise endorsed by the credit card issuers.

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21 COMMENTS

  1. I think it is wrong to say that you lose nothing.

    Each ticket you book is charged around $2.50 for each leg of your trip.

    If you book 10 RT, it’ll cost you $50. You have 10 different reservations numbers to keep track of, each with a $5 balance that expires in a year.

    If you cancel 8 of those 10, we can lose out in $40.

    I would just caution not to book trips willy nilly

    • You’re right. Do the math of the potential of losing the $2.50 per segment, how much value in points you would save if you take your speculative booking, and the percentage chance of taking it. It probably works out to needing to have an 8% chance of taking the speculative booking to make it worth booking.

  2. To answer my own question, WN points are worth double for me, or at least 1.5… 2x still sounds good to me.

    • If you’re dealing with the companion pass, I think some speculative UR transfers and awards makes sense. If not, I’d have a hard time losing the UR, which I can use for better than 1.69 cents still.

  3. I need to book some Southwest flights after October 31, 2014. If I book a flight for October using Rapid Rewards miles, and change the reservation it when the new flight is made available, will Southwest honor the original Rapid rewards price?

      • I took your great advice and booked a speculative flight to use all my points. Thanks for the timely advice.

        But in your email – “There’s nothing to lose from speculative bookings, so make sure you get them done this weekend” – well there is according to your statement in the above comment – yes I get my points back, but the re-book is at the de-valued point value?

        So please help me understand – so now, instead of a large pool of points, that I can use anytime, when I refund these points in October by cancelling the trip, I get back my points, but now does SWA put a time limit on how long I can redeem those points??

        Thanks for your help and good advice.

  4. There’s no such thing as “the original Rapid rewards price”, since the price fluctuates with the cost of the ticket. If you change the reservation when the new flight is made available, the Rapid Rewards price will be whatever the price is THAT DAY. It may be lower, higher, or the same.

  5. Thanks Scott !!
    Just booked my BNA flt. to my Doctor so I don’t get Cancer and YOU saved me some points to boot.

    Very Thankful Poor French Cave Dweller

    Hope I win the contest I down to last 80K SW points

  6. P
    Just think if you were 17% short of points for your next flt.What SW should do is send everyone a couple thousand points for nothing like they did to me the sheep herd would be happy.

  7. Would there be any advantage switching rapid reward points to A+ credits then converting back later? I’m unsure of the conversion rates and restrictions.

  8. I agree the devaluation is not ideal. I’ve only used Southwest points for short, inexpensive flights. Otherwise, I prefer to use them for long-haul via the “classic” Rapid Rewards Voucher program. I’m protecting against the devaluation by converting 9,600 Southwest points into 8 Airtran credits. Those can be used for 1-way flights anywhere Airtan flies. I’ll then convert some of those back into Southwest Rapid Rewards Vouchers. Good for 1 year and can be extended by moving back-and-forth between Southwest and Airtran.

  9. Southwest jumped the gun!! They devalued at midnight Dallas time, which was 10PM out on the Left Coast. Oh, well, you lose a few….

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